The revelation of 1.9 million temporary unskilled and insecure workers does not look like the makings of a wage explosion, writes DrCraigEmerson.
Two revelations in the last week confirm that the Reserve Bank is on the wrong track with its unremitting interest rate rises, risking an Australian recession for no good reason.
The board was so concerned with the official outlook for wages that it contemplated a 50 basis point cash rate increase. But it settled on a 25 basis point increase, while the board “agreed that further increases in interest rates are likely to be needed over the months ahead”. History shows that the Reserve Bank consistently over-estimates wage rises, increasing interest rates or keeping them higher for longer to suppress a mythical wage breakout.After Australia successfully navigated the Global Financial Crisis and, unlike most advanced countries, avoided a recession, the Reserve Bank repeatedly got its wage forecasts wrong, predicting a wages breakout.
Instead, when the reality diverged from the RBA’s models year after year after year, the bank seems to have concluded that reality must be wrong because its model is right.
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